Collaboration: Beyond the CUSO
I personally do not know of a website where information can be obtained in reference to collaborative efforts. I do know that there are a number of credit unions who are sharing resources to accomplish some of their daily tasks.
Collaboration is an essential element in today’s credit union operations. By collaborating credit unions who might not be able to deliver some valuable services to their members may be able to offer these valuable services either more efficiently or quicker and often at a much lower cost to the credit union. To do so does not necessarily require that you establish a CUSO.
Before getting started it is essential that all credit unions involved establish what I like to call the rules of engagement or in other words, set the expectations. Some things to pay very close attention to are,
- By collaborating are you able to take advantage of the economies of scale with a vendor or by sharing a resource?
- Will you be able to lower the operational costs associated with the product in question by collaborating?
- Do the credit unions involved in the project have the same end goal in mind?
There are many more questions to be asked but you can at least get started if you think about some of things I mentioned.
Before moving forward it is also very important for the credit unions involved to put together some sort of written agreement which clearly documents the responsibilities of all parties involved. If expectations are not established from the beginning and managed throughout the relationship things could get troublesome.
I think it is very important today to look at all areas in your credit union to determine which work areas lend themselves to a collaborative type environment. These would be work areas where credit unions could benefit from resource sharing. Collections and compliance are a couple of departments that lend themselves nicely to collaboration.
I would recommend that if you are going to get started, talk to the credit unions that have done it or are doing it. There is a lot of resource sharing going on in our industry and it is working!
Absolutely. In fact you might be surprised by what you can do. Credit unions have a long history of helping other credit unions. Most of the activities involve offering products or services to the credit union rather than directly to the other credit union's members.
Some examples include, providing in-house check processing, loan servicing, or other operational support. You can also make a credit union a loan, assit them by buying or servicing equipment like ATMs and sharing a common branch location. You can find the information in the NCUA Regulations-Part 721-Incidential Powers.
Senior Vice President/CFO
Patelco Credit Union
I know that Jon Hernandez is the CEO of three different credit unions: Mattel Federal CU, Downey City Employee FCU, and CalCom Federal CU based in El Segundo, Downey and Torrance, Calif. respectively. They do a great job of sharing resources, staff etc., helping each other without having to go through a CUSO. Here’s a little profile of Jon from CUES: http://www.cues.org/iamcues/jonHer.html Definitely a leader in inter-credit union collaboration.
Two big ways CUs can offer services to each other:
1) Some type of independent contractor agreement. Many CU CEO’s are actually contract employees and not considered to be a full time employee. In their employment contract most of them have clauses eliminating them from working with other CUs in the vicinity, etc. I’d wager that Jon is technically an independent contractor and legally has relationships with all three CUs and a clear understanding with all of the CU’s about expectations. The contracts he has with each CU may even be the same. I’m not intimately familiar with the legal status of Jon’s employment, but that is theoretically one way a CU could share an employee.
2) CUSO. Some people think it is a four-letter (why wouldn’t you want to start a CUSO?), but it most likely will be the cleanest way to deliver a service or a product. UBIT is a four-letter word however. It stands for unrelated business income tax and it is the reason credit unions would have a hard time starting a gas station CUSO, a tanning salon, or a skinning tie design firm for Brent. Credit unions can purchase services from anyone, starting a CUSO really just helps CU share in expense and/or income.
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